India’s Industrial Investment Declines

India Hotspots
India Hotspots
The lack of industrial investment has often been cited as a major impediment for Indias poor industrial growth. Proposed industrial investment for 2012 based on the total annual value of investment plans plunged sharply to INR 5.68 trillion (the lowest annual total since 2005), from INR 15.40 trillion during 2011. It was also the first year that Indias industrial investment had fallen below INR 10 trillion since 2007. The decline in Indias industrial investment does not bode well for its labour market according to estimates from the Employment and Unemployment Survey conducted by the Ministry of Statistics and Programme Implementation, just 386 per 1,000 persons were employed as of the year that ended June 2012. Reduced industrial investments imply less employment creation; the investments in 2012 are expected to create just 707,775 jobs compared to the 2,095,400 jobs created during 2011. India Hotspots While proposed investments in electrical equipment industries have constituted more than half of Indias industrial investments since 2010, the industry has since seen a declining proportion of the total. Investment in electrical equipment industries represented 25.39% of total industrial investments in 2012, down from 50.56% during 2011 as proposed investments into the sector declined sharply to INR 1.44 trillion in 2012 from INR 7.79 trillion during 2011. Conversely, proposed industrial investments almost doubled in the non-fertilizer chemical industry, rising to INR 742.71 billion (13.08% of total proposed industrial investments) during 2012 from INR 377.85 billion during 2011 (or 2.45%). The increase is attributable to perceived strong growth prospects in the sector. For instance, chemical and chemical product manufacturing enjoyed a relatively strong performance in the second half of 2012 and this continued to May 2013 with strong year-on-year growth of 8.51%. Increased investment is welcome for the chemical manufacturing sector given the traditionally fragmented nature of the industry with poor access to financial resources. State-wise, despite receiving less industrial investment in absolute terms, Gujarat emerged as a key recipient of industrial investment with INR 1.26 trillion (22.22% of total industrial investments) in 2012 compared to INR 1.43 trillion (9.27%) during the previous year. This reflects the comparative attractions of Gujarat despite overall growth concerns in India. Indias lack of investment is linked to the poor and erratic growth in its Industrial Production Index (IPI) since early 2012. According to the Central Statistics Organisation, although Indias IPI increased by 0.24% on a month-on-month basis in May 2013, it dropped by 1.59% year-on-year. Poor industrial investment may further impair the development of its industries, and limit the possibility of economic growth returning to pre-crisis highs. Contributed by Chan Yee Lui, CEIC Analyst Back to Blog
19th July 2013 India’s Industrial Investment Declines

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